The Bank of England’s Monetary Policy Committee voted to reduce the base rate by 0.25 percentage points to 4% in August, although four of the nine Committee members voted in favour of leaving rates unchanged.
This marks the fifth base rate cut since August 2024. The last time the base rate stood at 4% was in February 2023.
The hope is that cheaper borrowing costs will help boost consumer and business confidence, which has suffered due to rising unemployment and uncertainty over potential tax rises later this year.
Many economists had expected the rate to hold steady at 4.25% this month, citing ongoing economic uncertainty and persistent inflationary pressures. According to the latest figures from the Office for National Statistics, inflation - as measured by the Consumer Prices Index (CPI) - stood at 3.6% in the 12 months to June 2025. That’s well above the government’s 2% target and represents the highest reading since January 2024.
Good news for borrowers
Rates have already eased slightly over the past month, and the latest rate cut will be seen as positive news for borrowers. Analysis by L&C Mortgages shows the average of the lowest LTV 2- and 5-year fixed rates from the top ten lenders nudged down from the beginning of June to early July, landing at 3.99% for a 2-year fix, and 4.05% for a 5-year. By the beginning of August these had edged down further, to 3.89% for a 2-year deal and 3.99% for a 5-year.
Since the most attractive deals often don’t last long, it’s worth acting quickly if you find a product that fits your needs. Many lenders allow you to lock in a mortgage offer up to six months in advance. If you’re unsure about fixing your rate now, our Rate Check service offers added flexibility and reassurance. It allows you to secure a rate today to protect against potential increases, while still giving you the option to review and switch to a better deal before your mortgage completes.
